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by Peter Mooslechner, Martin Schürz, Pirmin Fessler

Theoretical Reasoning and Empirical Evidence on Inheritance and Wealth Distribution (on the basis of LWS data). by Peter Mooslechner, Martin Schürz, Pirmin Fessler. Motivation. Debate in Austria on abolishment of inheritance tax Family values Aspects of social justice are neglected.

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by Peter Mooslechner, Martin Schürz, Pirmin Fessler

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  1. Theoretical Reasoning and Empirical Evidence on Inheritance and Wealth Distribution(on the basis of LWS data) by Peter Mooslechner, Martin Schürz, Pirmin Fessler

  2. Motivation • Debate in Austria on abolishment of inheritance tax • Family values • Aspects of social justice are neglected

  3. Structure 1. Theoretical reasoning - Problems with definition of inheritance - Heterogeneity of LWS data - Focus on motives of bequest 2. Empirical evidence - Cross country comparison between heirs and non-heirs - Education levels of heirs and non-heirs 3. Conclusions for data improvements

  4. Problems with definition • Focus on material inheritances • Focus on individuals • Complex relationship between gifts and bequests

  5. How can LWS data contribute?

  6. Heterogeneity in the reported data.

  7. Motives of bequest

  8. Analytical shortcomings concerning motives • The available data mix between gifts and inheritance in the LWS does not allow analysing motives. • Motives for bequests vary over time and are influenced by behaviour itself. • Motives are related to family values and social norms and influenced by the institutions in different countries.

  9. Austria

  10. Wealth Distribution and Inheritance • To conclude that the elimination of intergenerational transfers would lead to more inequality has shortcomings: • Would the wealthy elderly instead consume their wealth then there should be an equalizing effect on wealth distribution • Definition of wealth remains mainly data driven • Poorer people rather spend the money while the rich accumulate it • Inheritances have to be seen in context with other wealth transfers (investment in human capital, gifts, social capital, prestige, power, inheritances)

  11. Cross country comparison between heirs and non-heirs

  12. Education levels of heirs vs. non-heirs • Level of education: indicator for parental • Education levels are very heterogeneous in LWS • Rudimentary classification according to ISCED 1997

  13. Why cross country differences? • Differences in the freedom to select beneficiaries: family centered pattern of Germany versus the individual-centered pattern of the US. • Differences in welfare regimes will create different needs for family transfers. • Differences in gifts and inheritance taxes may affect actual behaviour and may also be a reason that respondents are unwilling to respond in survey interviews. • Differences in wealth distribution: As rich people make most of the wealth transfers countries with a high wealth concentration should have a higher share of wealth transfers.

  14. How to improve cross country comparison? • Comparable money values of inheritances. • Wealth transfers from whom to whom? • A sharp distinction between inheritances and other transfers like lottery winnings or gifts from non-family members. • At least some information on the parents of the household head or spouse beyond the age/not living information. • A comparison of inheritances over time (at best panel data) would allow to further investigate possible changes in the importance of different transmission channels.

  15. Information on parents? Ohlsson (2005) stated that, „the most useful information for understanding transfers received is data on whether the individual‘s/the spouses‘s parents are deceased and, if so, when at what ages they died.“

  16. Conclusions • This paper argues for caution in several ways. Theoretical reasoning has not only to refer to but also to conceptualize the complexity of social reality. • Despite that bequests and gifts have to be analyzed separately we argued for a broader understanding of inheritance (“inheritance of inequality”). • A sharp distinction between inheritances and other transfers like lottery winnings or gifts from non-family members is necessary. • As inter vivos transfers are more likely to be intentional they are more likely to be informative about wealth transfer motives. • Substantial differences of opinion remain on the long-term effect of bequests on wealth distribution. We showed on the basis of LWS data that the situation of the heirs is significantly better than the one of the non-heirs.

  17. Annex Inheritance in Austria

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